With the election now history, and the Conservatives with a clear win, the London property market is already on a roll. There was no time for the dust to settle, already there are reports in the market of deals being transacted.
Estate agents were reporting calls from buyers at the top end of the property market, as the Conservatives’ shock election win lifted fears of a mansion tax on £2m-plus homes.
At the top end, stalled transactions will now start to creep back into the market.
One agent reported calls coming in for properties just after midnight when the Conservative victory looked assured; half of which came from UK purchasers and the other half from overseas buyers.
This included an offer from a middle eastern family on a £2.5m apartment in St John’s Wood which had been on the market stagnating for the last eight months.
There was even a fear in the market from buyers, worried deals which were in the pipeline where the prices had been agreed pre election would now be pushed up in price.
Buyers were frantically trying to get them over the line, and it can now be seen there is a difference in property prices pre and post election.
Last week on Friday morning another agent had already done over £25m worth of exchanges which were in the pipeline, with another £5m expected during the rest of the day.
Another office had received three offers as a result of the election, two of which were on properties costing over £2m.
The threat of mansion tax had stalled the market since the beginning of the year.
The census is the election has been a very bullish outcome for the London property market at all price levels.
Some predict residential property above £2m to increase by up to 20% in a year, and that over the next five years capital values in prime London could even double, now that the brakes have come off.
This upbeat euphoria was not restricted to only bricks and mortar, for example shares in Foxtons, the London estate agent known for its green mini’s, soared by nearly 12 per cent on Friday morning alone, owing as much to the demolition of the “mansion tax” as to the defeat of Labour’s pledge to slash letting agents’ fees and introduce three-year tenancies. Labour had plans to heavily regulate the rental sector.
Warning that these proposals could have destabilised the buy-to-let sector, Richard Lambert, chief executive of the National Landlords Association, said the Tory majority “should give confidence to landlords to invest their own money in providing homes and allow the rental market to develop to meet the needs of a rapidly changing tenant demographic”.
Regardless of the election result, the fundamentals of property still haven’t changed, there is a chronic lack of housing stock and the demand for housing is increasing due to factors such as net inward migration, the break down of the family nucleus etc. and the need for housing stock doesn’t look like it will be satiated in the near future.
The proportion of 25 to 34 year olds owning their own home has fallen from 59% to 36% in a only decade. Home ownership is decreasing.
Not surprising given house prices rose by just over 7% last year and almost 18% in London, correspondingly wages rose by only 2.1%.
We’re in a situation where house prices are increasing more than a person can earn, let alone save, in short you’re probably better of buying another property than working!
Our view of investing pre election was based on taking a pessimistic view and looking at the worst case scenario. Even if Labour had won and the mansion tax was implemented, after the market understood what the policy was and how it would be implemented the prices would after a short time start rising again. It was the fear of the unknown which was scaring investors.
Taking into account this scenario London property prices would still carry on going upwards, I mean where else are investors going to put their money? There aren’t many cities in the world with their doors as wide open as London regarding property. Both in the amount one can invest and the ease of money flow in and out.
There was a herd mentality created by this uncertainty. Properties which were not even affected by the mansion tax were being sold cheaply in our opinion, with sellers in a rush to get out now.
With this in mind we closed a few deals which were cheap mostly due to the election. I believe the discount rate was around 50% of the normal market price. Two of which have exchanged and are yet to complete and another has already completed. They have no doubt risen in price overnight.
We have come up with two investment deals both in Central London one via a fund route and the other directly in a property; the principle being it is better to own a smaller piece of a quality asset than a whole piece of mediocre one.
On that subject I was speaking to a property dealer/investor yesterday who was telling me about an investment he had made in Birmingham City Centre, eleven years ago. He had bought the property for £140,000, since that time the property had always been rented, but hadn’t gone up in value in fact it had gone down to £120,000. This made me feel quite smug about myself, as I too had invested in a property for £140,000 in Birmingham City Centre, apparently for a discount, about the same time and mine is worth £135,000 currently.
This drives home the first property mantra: Location, Location and Location. Keep chanting this when investing and you will probably do quite well!
